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Article: A power-of-two ordering policy for one-warehouse multiretailer systems with stochastic demand
Title | A power-of-two ordering policy for one-warehouse multiretailer systems with stochastic demand |
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Authors | |
Keywords | One-warehouse multiretailer system Approximation algorithm Analysis of algorithms |
Issue Date | 2010 |
Citation | Operations Research, 2010, v. 58, n. 2, p. 492-502 How to Cite? |
Abstract | We study a two-echelon supply chain with one warehouse and N (nonidentical) retailers facing stochastic demand. An easy-to-implement inventory policy, the so-called power-of-two (POT) policy, is proposed to manage inventory for the system. To maintain a certain service level, safety stocks are kept at the warehouse and each retailer outlet to buffer random demand. Our analysis highlights the important role of the warehouse safety stock level, which, in addition to the length of the warehouse order interval, significantly affects the lengths of the retailers' order intervals. By combining the length of the warehouse order interval with the warehouse safety stock level, we introduce a plane partition method and develop a polynomial time algorithm to find a POT policy for arbitrary target service levels. The long-run average cost of the proposed POT policy is guaranteed to be no more than 1.26 times the optimal POT policy cost. We also show that our proposed policy can be computed in O(N 3). ©2010 INFORMS. |
Persistent Identifier | http://hdl.handle.net/10722/296062 |
ISSN | 2023 Impact Factor: 2.2 2023 SCImago Journal Rankings: 2.848 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Chu, Leon Yang | - |
dc.contributor.author | Shen, Zuo Jun Max | - |
dc.date.accessioned | 2021-02-11T04:52:45Z | - |
dc.date.available | 2021-02-11T04:52:45Z | - |
dc.date.issued | 2010 | - |
dc.identifier.citation | Operations Research, 2010, v. 58, n. 2, p. 492-502 | - |
dc.identifier.issn | 0030-364X | - |
dc.identifier.uri | http://hdl.handle.net/10722/296062 | - |
dc.description.abstract | We study a two-echelon supply chain with one warehouse and N (nonidentical) retailers facing stochastic demand. An easy-to-implement inventory policy, the so-called power-of-two (POT) policy, is proposed to manage inventory for the system. To maintain a certain service level, safety stocks are kept at the warehouse and each retailer outlet to buffer random demand. Our analysis highlights the important role of the warehouse safety stock level, which, in addition to the length of the warehouse order interval, significantly affects the lengths of the retailers' order intervals. By combining the length of the warehouse order interval with the warehouse safety stock level, we introduce a plane partition method and develop a polynomial time algorithm to find a POT policy for arbitrary target service levels. The long-run average cost of the proposed POT policy is guaranteed to be no more than 1.26 times the optimal POT policy cost. We also show that our proposed policy can be computed in O(N 3). ©2010 INFORMS. | - |
dc.language | eng | - |
dc.relation.ispartof | Operations Research | - |
dc.subject | One-warehouse multiretailer system | - |
dc.subject | Approximation algorithm | - |
dc.subject | Analysis of algorithms | - |
dc.title | A power-of-two ordering policy for one-warehouse multiretailer systems with stochastic demand | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/opre.1090.0707 | - |
dc.identifier.scopus | eid_2-s2.0-77951152071 | - |
dc.identifier.volume | 58 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 492 | - |
dc.identifier.epage | 502 | - |
dc.identifier.eissn | 1526-5463 | - |
dc.identifier.isi | WOS:000276735200018 | - |
dc.identifier.issnl | 0030-364X | - |